Working Paper No. 930

Cross-Industry Heterogeneity in Export Participation: The Role of Scale Economies in R&D

Published: October 5, 2012Pages: 30Keywords: International Trade; Trade Costs; Endogenous Sunk CostsJEL-codes: F12; L11; O30

Cross-Industry Heterogeneity in Export Participation: The Role of Scale Economies in R&D Shon Ferguson


This paper shows that the R&D intensity of an industry plays an important role in determining international trade patterns via its e¤ect on scale economies. I first develop a model of trade with heterogeneous firms where firms compete with each other by spending on fixed product development costs such as R&D. The model predicts that a larger share of firms are exporters in industries where R&D is a large component of total costs. The model also predicts that R&D-intense industries are less sensitive to trade costs. I find empirical support for these predictions using firm-level data for Swedish manufacturing industries. The results also highlight the importance of controlling for firm size when measuring the firm extensive margin of exports.
 

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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